KUALA LUMPUR: Malaysia Airlines Bhd (MAB) has the financial capacity, backed by a solid shareholder in Khazanah Nasional Bhd, to buy the 16 aircraft it has committed with American aircraft maker Boeing, analysts said.
"Although MAB does not reveal its financial account, we assume Khazanah can help MAB with regards to financing,” Maybank Investment Bank Bhd aviation analyst Mohshin Aziz told NST Business yesterday.
MAB signed an initial deal with Boeing to buy the aircraft in Washington yesterday during Prime Minister Datuk Seri Najib Razak's visit to the US.
They comprise eight 787-9 Dreamliners, by converting eight of MAB’s existing order of the Boeing 737 MAX aircraft, and eight additional purchase rights of the 737 MAX 8s.
The deal also includes Boeing’s Global Fleet Care Service to maintain the national carrier’s current and future Boeing aircraft.
Najib said Malaysia planned to increase the number of Boeing aircraft to be purchased by MAB.
"We are committed to 25 planes of the 737 MAX 10, plus eight 787 Dreamliners. And there is a strong probability -- not possibility – probability that we will add 25 more 737 MAX 10 in the near future.
“So within five years, the deal will be worth beyond AS$10 billion. We will also try to persuade AirAsia to purchase GE engines," he told the media after meeting with the US President Donald Trump.
Mohshin said it is important for MAB to add wide-body aircraft in its fleet, thus improving its services for medium to long-haul flights.
“They (wide-body aircraft) are the tools that can go the distance,” he said, adding that some of MAB’s existing aircraft are getting old and need to be replaced to ensure efficiency.
On the company’s profitability, Mohshin said it would mainly dependent on the market demand and global fuel prices, adding that the aviation market is performing well.
“The industry has a whole has been very efficient. Airasia, AirAsia X, Malindo and MAB have managed the supply and demand well,” he added.
Hong Leong Investment Bank Bhd aviation analyst Daniel Wong concurred that MAB would be able to finance the purchases, citing that the government had previously committed to assist the national airline.
"Otherwise, Boeing would not be signing the contracts for the purchases,” he said.
Wong said the acquisition is practical for the airline to renew its old fleet, citing that MAB has huge reliance on A380s, which have been designated for Haj and Umrah.
“MAB needs to have more efficient aircraft to service both domestic and international routes,” he said.
On the potential expansion to European routes, he believes MAB will still be concentrating on London, unless the demand starts to improve in other regions.
“At the moment, we believe the new aircraft will be designated for routes in London, China and North Asia as well as Australia,” he said.
In a Boeing statement yesterday, MAB managing director and chief executive officer Peter Bellew said the new widebody aircraft are a key to making Malaysia Airlines a premium airline offering a five-star product again.
"The extraordinary range of the 787-9 gives an ability to operate to any point in Europe and some US destinations in the future from Kuala Lumpur,” he added.
Bellew said the MOU with Boeing on their Global Fleet Care programme would allow the two companies to build a world class MRO for the 737 MAX, 787 and 737NG based on Malaysia's existing facilities in Kuala Lumpur.
Malaysia Airlines currently operates more than 50 Next-Generation 737s and has an additional 25 737 MAXs on order, including 10 for the new 737 MAX 10.
"Boeing offers the very best wide-body and single aisle airplanes in the world and we are delighted Malaysia Airlines continues to put its trust and confidence in Boeing with this MOU for 16 Boeing airplanes," said Kevin McAllister, president and chief executive officer, Boeing Commercial Airplanes.
He said the 787 and the 737 MAX will provide Malaysia Airlines with unmatched fuel efficiency, economics and a superior passenger experience as they continue to grow their business across Southeast Asia and beyond.